Conservative manifesto - 'a victory for the Treasury'

Written by Talya Misiri

18/05/17

The Conservative party manifesto, published today, is a "victory for the Treasury", it has been said.

Commenting on the Conservatives' plan to scrap the triple lock on state pensions, Aberdeen Asset Management head of retirement savings Gregg McClymont opined: “On the face of it, this looks like a victory for the Treasury. The triple lock is eye wateringly expensive over the long term."

“The problem for the triple lock is that it has increasingly become seen as unfair because pensioners now have higher average incomes than the population as a whole. However future generations who do not have defined benefit pensions or own their own home are likely to be poorer pensioners. The UK state pension is low by international standards despite overwhelming evidence from across the world that a generous state pension is the most effective way possible of reducing pensioner poverty,” McClymont added.

While both the Labour and Liberal Democrat parties have committed to keeping the policy, which sees the state pension increase by inflation, average earnings or 2.5 per cent, the Conservative's view to end the guarantee has been praised as a victory for the UK economy and future generations.

"The bottom line is that the triple lock is an expensive policy and Theresa May has clearly sounded its death knell," AJ Bell senior analyst Tom Selby said.

Selby emphasised this by referring to the Office for Budget Responsibility's projections that suggest keeping the triple lock could cost £15bn more than earnings by 2060.

"A double lock of inflation or earnings after 2020 will still ensure the state pension at least increases in line with the cost of living. The proposals to scrap the pension triple lock and abandon the cap on social care costs both emphasise the importance of private savings. Less support from the government means people are going to have to put in place their own plans to fund their retirement and long term care through greater savings in pensions and ISAs,” Selby added.

Also commenting on this pledge, Nucleus Financial product technical manager Rachel Vahey commented that the Conservatives "have obviously paid heed to both the Work and Pensions Committee and John Cridland's independent review of the state pension age which recommended abandoning the triple lock."

Vahey noted that this decision suggests that this cold signal an aim, "to tackle intergenerational unfairness in an effort to appeal to a wider share of the electorate."

Similarly Society of Pension Professional president and Spence and Partners director Hugh Nolan noted: “Pensioners have been the main beneficiaries of political tinkering with pensions and benefits recently, reflecting the power of the grey vote over unregistered youngsters. A confident Conservative Party clearly feels the time has come to challenge that with the removal of the triple lock."

Lincoln Pensions CEO Darren Redmayne also shared this view: "It's a brave decision to water down the pensions triple lock... it's clear that the government recognises the generational issues building-up with the current retired generation benefiting from triple-lock."

Furthermore, the Conservative Party's pledge to extend auto-enrolment to the self employed was received well by the industry.

"Automatic enrolment has been one of the standout successes for pensions in recent years, and we are very pleased the Conservatives would like to extend it to include the self-employed. Generally, the self-employed are not making enough plans to save for later life. However, in the absence of an employer contribution we need to find a way of enticing them to remain automatically enrolled and save for their future," Vahey said.

Hargreaves Lansdown head of policy Tom McPhail added that while this decision is welcome, auto-enrolment should also "be expanded to accommodate the lower paid as well, who are currently missing out on much needed retirement savings."
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Moreover, discussing plans to allocate greater powers to The Pensions Regulator, McPhail said: "They have also promised stronger powers for The Pension Regulator to protect pension scheme members rights. The challenge here will be to strike a balance between protecting pension scheme members' rights on the one hand, and on the other allowing British industry to flourish.”